The One Laptop per Child project said on Tuesday that production of the XO laptop for children in developing countries had begun, a milestone that could shake up the PC industry by ushering in a new era of low-cost computing.

The One Laptop per Child (OLPC) project, started in 2005 by MIT professor Nicholas Negroponte, said Taiwan’s Quanta Computer had started mass production of its first product, the lime-green-and-white XO laptop computer, at a factory in Changshu, China.

The group has already announced orders for children in Uruguay and Mongolia. It also plans to offer the laptops to Americans and Canadians through a $399 (191) holiday charity programme that covers the cost of providing a second machine to a child overseas.

The device, which runs on Linux software, has already had a significant impact on the industry.

Negroponte has travelled the globe meeting world leaders and talking to the public about speeding the introduction of computers to children in the developing world. The XO is designed for elementary school students who are given the machines to take to and from school, like textbooks.

Analysts say the publicity Negroponte generated, along with concern OLPC’s laptop might take business from commercial products, has prompted companies, including Intel and Microsoft, to boost investment in developing countries.

It has also spurred the launch of a new class of low-cost computers for a market broader than school children.

Intel has developed the Classmate PC for the education market in developing countries, a laptop that it says costs $200 to build. So far its biggest customer is Pakistan’s Allama Iqbal Open University, which has ordered 700,000 of them.

Taiwan’s Asus recently introduced the Eee PC, a line of notebook computers that retails for as little as $245 in some countries and is targeted at children and women.

In the US, on Friday, Wal-Mart Stores offered a limited number of laptops from Acer for $348. It is possible that Wal-Mart might repeat the promotion or that other retailers will offer similar deals during the holiday shopping season.